Florida Denies State Farm Request for a Hearing on Withdrawa

(BestWire Services Via Acquire Media NewsEdge) The saga that is State Farm Florida's attempt to leave the property insurance market in the Sunshine State continues, with word from the Florida Office of Insurance Regulation that it rejected the insurer's request for an administrative hearing.

A petition the insurer filed to go before the Division of Administrative Hearings and discuss its withdrawal plan did not comply with Florida statutes, OIR said. An amended petition is due by April 14.

McCarty approved State Farm Florida's plan to withdraw from the property insurance market but he barred the company from penalizing policyholders for terminating their contracts early and from preventing its agents from working with other companies. In addition, the company must surrender its state certificate to write insurance within 30 days (BestWire, Feb. 13, 2009). State Farm plans to stay to sell automobile insurance.


McCarty's approval with strings attached "will impair State Farm Florida's ability to withdraw from doing business in the state in a manner that will not be detrimental to its policyholders or the citizens of the state," the insurer said in its petition.

In a letter to the insurer's legal representation, McCarty said the petition "fails to set forth with sufficient particularity 'all disputed issues of material fact' that affects State Farm Florida's 'substantial interests' that would entitle it to an administrative proceeding." The insurer, set to leave about 1.2 million policies behind, said it had to leave the market or face insolvency by the end of 2011. The insurance office said "nowhere in the petition is there any explanation of how the order granting the withdrawal of State Farm Florida will impact the danger of financial impairment or insolvency." State Farm spokesman Chris Neal said the company thought the petition was complete when it was submitted but it will review the OIR's latest order and attempt to comply. He said State Farm Florida "remains hopeful that an agreement can be reached before a hearing is needed." State Farm Florida Insurance Co. currently has a Best's Financial Strength Rating of B+ (Good). An AMB Credit Report notes the company is "susceptible to catastrophic loss accumulation, competitive market conditions and regulatory changes." In 2007, the top five writers of homeowners multiperil in Florida, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 21.3% market share; Citizens Property Insurance Corp., with 20.5%; Universal P&C Insurance Co., with 6.1%; USAA Group, with 5.2%; and Tower Hill Group, with 4.4%.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com) Copyright ? 2009 A.M. Best Company, Inc.